After Huge Sell-Offs, Have Robinhood And Peloton Become Buyout Targets?

It’s been a disastrous few months for shareholders of Peloton Interactive Inc PTON and Robinhood Markets Inc HOOD. Peloton shares are down 72.6% in the past six months, and Robinhood shares are down 81.6% from their post-IPO high of $85 back in August.

While both companies have their fair share of problems, the silver lining to such dramatic declines in value is that the two companies may become attractive buyout targets at some point.

Bumpy Ride: Peloton's misfortunes are tied to treadmill safety recalls and a sharp slowdown in revenue growth following the pandemic.

For Robinhood, persistent losses, decelerating user growth, and potential regulatory headwinds targeting payment for order flow has spooked investors. In addition, Robinhood reported 40% of its cryptocurrency transaction revenue and 8% of its total revenue came from meme crypto Dogecoin DOGE/USD, a revenue source that could start to dry up if the Dogecoin trend becomes stale in coming quarters.

Robinhood and Peloton investors who have stuck it out through the pain see value in the two companies and their products, and other companies may start to see the same value as well.

Potential Buyers: A Wealth of Common Sense's Ben Carlson recently pointed out Robinhood and Peloton’s combined market caps have dropped from a peak of $109 billion to around $24 billion today.

Carlson asked his Twitter followers which companies should make buyout bids for Robinhood and Peloton. He suggested Peloton would make a good acquisition for Nike Inc NKE or Apple, Inc. AAPL, while Robinhood could be an attractive buyout target for Block Inc SQ or Paypal Holdings Inc PYPL.

Benzinga’s Take: Even after its huge 2021 slide, Peloton is still priced above its IPO price and valuation. Robinhood may be the more appealing takeover candidate of the two at this point given its current market cap of around $13.3 billion is significantly lower than its IPO valuation of $32 billion in July of last year.